MSE News: Insurance lift for elderly, but don't expect cheaper prices

2sides2everystory wrote: »

Using age as a motor insurance rating factor should already have been outlawed.

why should it "be outlawed"?

2sides2everystory wrote: »

Because my friend it is direct age discrimination.

Yes, it is "discrimination", but not in the perjorative sense of the word - it is an insurer discriminating between different levels of risk. Age is one of the material facts most stongly correlated with risk in motor insurance.

There is a difference between equality and fairness. If pricing according to age were outlawed, you would have equality but not fairness - i.e. higher risks being subsidised by low risks.

Personal examples are meaningless - robust statistics are drawn from large pools.

The difference being that with age, your risk profile will change dramatically over life - so whilst you get higher premiums when you're younger, you get lower premiums when you're older. Although there is discrimination, it will affect everyone equally over their life. Pricing based on race would not be the same.

innovate wrote: »

It's got absolutely nothing to do with age discrimination, and everything with risk management.

Insurance companies have vast amounts of data from which they can deduce what the risk profile of a certain age group, a certain post code area, a certain profession etc etc is.

raskazz wrote: »

Yes, it is "discrimination", but not in the perjorative sense of the word - it is an insurer discriminating between different levels of risk. Age is one of the material facts most stongly correlated with risk in motor insurance.

I'm more with 2sides on this one. Equalities law has been moving steadily towards a situation where its unlawful to apply discriminatory criteria (no matter how much evidence justifies it) to any of the protected characteristics.

The furore over removing gender as a pricing variable for insurance was part of this. It had statistical validity for use, but the courts moved to ban it.

The problem with using age, or gender, or any other sweeping criteria is that they're really just convenient labels for the insurer to use to associate with actual underlying risk factors - ie, someone's age is not generally determining the higher risk.

It shines out when using age requires further explanations like "younger drivers are more risky because of issues like lack of driving experience", or "life insurance is more expensive for older people, because they have a lower life expectancy". I've yet to see any cast-iron examples that show age is actually the determining factor in its own right.

Does it matter? Well, yes it does. Its laziness on the insurers' part, and not a 'fair' approach to anyone who ticks all the right criteria for being a low risk, but unfortunately has the "wrong" age. Society has decided that this is unacceptable when it comes to gender, race, religion, sexual orientation, etc.

Age is pretty much the only protected characteristic where price discrimination is allowed. Can't help but feel that its days are numbered.

Just_Some_Guy wrote: »

They've already banned the use of gender in insurance pricing (dumb) and they're moving against age (even more dumb). We will end up with twenty-somethings paying the same amounts for life insurance as their grandparents...

Well, if you take a look at the health insurance systems used in several other European countries, this is pretty much what they do. Only the phrasing there is that the elderly pay the same for their health insurance as a healthy young worker, which is a fair and just approach.

All depends on your perspective, really.

Just_Some_Guy wrote: »

compelling insurers to ignore factors with millennia of underwriting experience behind them, all in the name of equality, is just stupid.

I'm not sure how relevant pre-computing underwriting history is in this case.

If you have limited information on risks, limited information on your current and potential customers, limited tools with which to analyse what you have already and what you want to know from customers, then you're restricted to basic, readily identifiable and provable criteria that are at least associated with risk drivers (gender and date of birth fit the bill nicely).

So the use of these factors historically makes sense, but in the modern world its driven by convenience (customers do benefit from this as well), but it creates artificial winners and losers.

Where age is the defining driver of risk, I don't have a problem in principle with it being used. But this is very rarely the case. Life insurance is probably one of the few areas that could pitch for an exemption, because its not actually very easy to guage life expectancy (key risk driver) without reference to age.

But coming back to the original article, I don't see how that can logically apply to motor or travel insurance. I talked about motor before, so lets take travel. Yes, older people as a whole might suffer from a higher chance of health issues which can trigger travel claims. But if health issues are a causal factor, should a 30 year old with similar health issues be getting an effective subsidy from fit and healthy 70 year olds?

It wouldn't be too much for travel insurers to look at rating health issues differently - some already ask travellers to get a GP's note certifying that the person is medically fit to travel, and actually look properly into pre-existing conditions that might be relevant to risk prior to underwriting.

Admittedly, they then slap age pricing on top (ouch!), but the point is that it would be possible to do it in a dfferent, more accurate, fairer way that doesn't revolve around someone's race, gender, marital status, age, etc.